Fuse.io <> Elk Finance grant proposal

Summary

Elk.Finance would like to apply for USDT and FUSE token Grant to:

Create a fast multi-chain bridge to provide fast low-cost inflow of value to Fuse blockchain. This bridge would connect Fuse to Heco, Polygon, xDai, Avalanche, BSC, Fantom, and all chains to be supported by Elk in the future.

About

Elk.Finance is an ecosystem that allows cross-chain interoperability by letting anyone move value across different blockchains. This reduces the fragmentation by breaking the barriers between blockchains. You can think of the core solution as a multi-chain DEX or a kind of mesh network for liquidity that is decentralized and non-custodial.

What is Elk about? A very simple analogy: today your phone can connect to the Internet using WiFi or 3/4/5G (on a multitude of carriers). You don’t have to think about connecting to one or the other in most cases: it just works.

L1s, L2s, hundreds of separate blockchains exist that do not interoperate, making it really hard to move value across chains; this creates a barrier to adoption. We want to make it easy and cheap to move your capital across chains, and beyond that we want to make it easy for the next generation of crypto adopters to interact without a plethora of blockchains without having to set up innumerable RPCs and wallets to interact with the most profitable projects out there.

Bridges alone will not be good enough to support the kind of cross-chain functionality we hope to see one day. Due to speed, cost, centralization, etc. a bridge only lets you connect two chains at once. If you have n chains, that is n * (n - 1) / 2 bridges. Currently, there are at least 10 well-known EVM-compatible blockchains. Connecting them all so you could move capital between any two in a single bridge transfer would require 45 different bridges. Cumbersome.

A bridge requires assets that exist in both chains. If you want to bridge token “A” between Ethereum and Fuse, you need a token A contract on both chains. The bridge provider must explicitly create the bridge asset on its non-native chain. If you have two bridges, there is no guarantee that they both use the same contract for token “A”, meaning that you would end up having multiple incompatible versions of token “A” on its non-native chain. That is pretty inconvenient and may cause serious issues. In our approach, you do not transfer token “A” between the two chains. You actually transfer the ELK token between the two chains. This means that you can have ETH on Ethereum and swap that for FUSE on Fantom in a matter of seconds, for a negligible transaction fee.

Liquidity pairs of ELK and tokens of interest on each supported chain can use corresponding liquidity pairs to swap assets across all chains. So, in the above example, you would have:

  1. ETH-ELK pair on Ethereum and an FUSE-ELK pair on Fantom.
  2. Swap your ETH for ELK on Ethereum
  3. Transfer your ELK from Ethereum to Fuse
  4. Swap the ELK on Fuse for FUSE.

Beyond that, we can also make it easy for users to withdraw capital from centralized exchanges into any chain you want, even if that CEX does not support your chain.

You can think of Elk as a L3. However, we are not just interested in building a simple multi-chain DEX. We want to build on top of our cross-chain functionality to support various features that currently are either impossible or very hard to achieve. For example, we want to support smart order routing (e.g. offloading trades from Ethereum to Fuse to save gas fees, or executing a swap on a different chain where you can get a better price).

A second use case is cross-chain loans, allowing you to easily park your capital on chain A and get a loan on chain B to trade there. Other use-cases include multi-chain synthetic assets or proxy assets.

Ultimately, our vision is to make it so that the user does not have to think about which chain they are on, or even about the fact that they are using different chains underneath.

Our solution will play a key role in helping to onboard the next wave of adopters and that we help break down the walls across chains. This is the future.

Motivation/Rationale

The origin story dates back to 2016 when it was becoming clear that there would be serious scalability problems with Bitcoin as well as Ethereum. At the time we believed there were two ways that this could go: It would collapse on itself, or scaling solutions, whether L2 or different L1’s, would be created and cause serious fragmentation.

It is clear we are in the second scenario: Many solutions but no concise winner. This is not good for the next generation of crypto enthusiasts. The cognitive load on new users includes:

  • Different wallet acquisition and security concerns associated with this
  • Multiple RPCs
  • Warnings about sending one asset from chain A to B directly from a wallet will lose your funds unless a suitable bridge is used
  • Transaction fees
  • Gas requirements
  • And so on

These are the problems that Elk wants to address.

Our inspiration comes from seeing the first blockchain scalability problems and realizing that this situation would likely get worse in the future. Today, the “race to scale” (among other races, e.g. to provide other features) for blockchains has led to significant fragmentation across chains. There are now hundreds of chains, most of them incompatible. We want to address that and, with it, make it easier for new users to adopt blockchain technology. Ultimately, our vision is to make it so that users don’t have to think so hard about which chain they are on when interacting with blockchain applications.

Objectives

Provide a fast and cheap way to move value into Fuse via ElkNet multi-bridge. Once on Fuse, the bridge will undergo further development, such as: smart order routing (offloading trades from Ethereum to Fuse or making a swap on a different chain than the one you are on to get a better price). Also, support for cross-chain loans or multi-chain synthetic assets.

Deliverable:

Bridge Fuse to BSC, Heco, Polygon, Avalanche, xDai, and Fantom via ElkNet.

Available routes on launch:

  • Heco <-> Fuse
  • Polygon <-> Fuse
  • Avalanche <-> Fuse
  • xDai <-> Fuse
  • Fantom <-> Fuse
  • BSC <-> Fuse
  • Swap for gas feature - this allows new users to transfer funds to Fuse with 1 ELK swapped for the native token, removing a pinch point for initial cross-chain movement.

Budget:

Current methodology for Elk deployment on a new chain:

  • $60,000 (raised from the community by purchasing functional Moose NFTs)
  • Funds raised bootstrap liquidity
  • Incentivised farms for liquidity providers

Option A

Desired outcomes from Fuse Grant:

  • Financial investment of the chain into Elk’s success
  • Base functionality to allow bridge diversity
  • Access to strategic chain specific partnerships

Fuse Grant proposal:

  • Bootstrap liquidity of $60,000
  • Fuse for liquidity mining incentive 100,000 Fuse
  • $10,000 for development costs

Option B

Desired outcomes from Fuse Grant:

  • Elk to have it’s hub be in the Fuse chain
  • Large financial investment of the chain into Elk’s success
  • Very intertwined with the fuse network and all of its projects.

Fuse Grant proposal:

  • ELK/Fuse liquidity of $1,000,000 ($500,000 ELK/$500,000 FUSE)

Consensus

There will be more arbitrage in the reconciliation of ELK. Many of our partners gain market exposure through promotional farms for their token (paired with Elk)… From what we have seen in our recent chain launches, we draw a lot of exposure to partner projects and generate interest in the native ecology of protocols.

We recently partnered with TraderJoe.xyz on Avalanche and provided consultation, support to their developers and farm engineers. This partnership included an Elk/Joe Farm on TraderJoe.xyz, and a promotional farm on Elk.Finance. Traderjoe’s community provided over 1 million in liquidity. A few weeks after launch Avalanche had a surge of interest and the market gained upward momentum. At that time Elk.Finance launched on Binance Smart Chain and gained a lot of attention. Our ElkNet ridge has now transferred over 3 Million Elk and continues to drive value into to Traderjoe.xyz. We can’t take credit for their success however we did contribute to their progress and brought a lot of value from many chains to their front door. $JOE experienced over a 7000% price increase over that time, and their TVL improved by 20x, breaching over $500 million and supplanting Pangolin for the top spot on the chain.

When we deploy on a new chain we invest our energies into seeking partnerships and promoting them cross-chain. We do not only interconnect transactions and values of coins, we aim to ease users into becoming chain-agnostic, discovering new opportunities, and ushering through the gateway of DeFi

Having considerable liquidity on Fuse, through the ELK/FUSE pairing, will draw the most attention and enable fast and low cost transference of value into Fuse.

We seek to lock liquidity of 1 million dollars of value in the ELK/FUSE LP Farm. We offer the FUSE Chain the ability to Lock this liquidity and profit from the Farms Swap Fees and Farm the Elk for that pairing. After the Fuse Chain and Elk Communities contribute their own liquidity the Fuse Chain Community can then secure their LP from the Farm and have the Funds Back.

We also seek a $25,000.00 grant to fund Elk promotions and strategic partnership investments, all to focus on developing the Fuse Ecosystem.

Contributor(s)

  • Ba’al - Systems architect with 17 years of experience, and blockchain advocate since 2011.
  • Elektra - 5 years of experience working at leading companies.
  • Thunder - Operations officer with a background in large commercial project management and business development.
  • Pyro - 5 years of experience working in digital marketing, sales, and IT project management at large European agencies.

The Elk team as a whole is 17 members strong (+ advisors): Four are developers (in process of hiring additional developers), and the rest focus on marketing, business development, and community management.

5 Likes

Thanks for the detailed proposal.

It’s an interesting read, and the need to easily cross chains without friction is a requirement for the expansion of blockchain into the consumer market.

I’ve a few questions to help me understand ELK and the nature of the bridges.

1) For each chain, Fuse would need to deploy a FUSE-ELK pair to enable the bridge function. What amount of liquidity is required (or suggested) for this and how is it managed?

Does the liquidity need to be kept in equilibrium? Otherwise swaps to a low liquidity chain will have a different price impact to those to a high liquidity pair. How do other projects manage these multiple LPs? Or are they just left to arbitrage?

2) I’m interested in the possible tx fee savings. Your example:

  1. ETH-ELK pair on Ethereum and a FUSE-ELK pair on Fantom.
  2. Swap your ETH for ELK on Ethereum
  3. Transfer your ELK from Ethereum to Fantom
  4. Swap the ELK on Fuse for FUSE.

Could be executed as:

  1. USDC-FUSE pair on Ethereum and a USDC-FUSE pair on Fantom.
  2. Swap your USDC for FUSE on Ethereum
  3. Transfer your FUSE from Ethereum to Fantom

Assuming there is a bridge, would this be a cheaper way of moving funds?

3) Using the example in 2, the functionality of the bridge can be fulfilled using USDC, and as most DEXs have a wide range of USDC/x LPs, this would enable native swapping on the chain as well. Using ELK token, any native swaps on the second chain would have to go through an ELK/x pair.

How many ELK/x LPs do Elk provide for on each chain?

4) Is this the aim of the CHFT stable coin proposed by Elk to resolve the issue in 3? Is the intention to be a 1:1 CHFT to USDC?

5) On your website it says: "The reason we are starting with Avalanche is because we plan for Avalanche to be a little bit more “central” to Elk.Finance than others. "

Is this still the case, and if so, what does ‘a little bit more central’ mean.

Thanks!

Could you zoom in on the explicit benefits you see for the Fuse Network?

At this moment it seems to me like the grant proposal is quite steep, while Elk has the most benefit because their token will be necessary for all the bridging.

To me it seems more beneficial to Fuse to find a solution that incorporates Fuse on the opposing chain(s).

Ofcourse the exposure of the Fuse Network to the Elk Community would be beneficial, but I don’t feel that justifies the requested grant, as Elk also gets exposure to the Fuse community, which has more users.